The Good Karma: Why It’s a Win-Win Situation for Big Companies to Support Social Businesses

Social businesses exist for a reason — they provide solutions to societal issues. They especially benefit the marginalized sector, which is made up of the poor and the disadvantaged.

Big, multinational companies that extend a hand in these social businesses is always a welcome sight. They might be already successful on their own, but by helping out those that aspire to make a difference, it brings the good feelings to a whole new level. Plus, they can also make contributions for the betterment of the society and not just for their own benefits.

An example of this is the private bank founded by Nobel laureate Muhammad Yunus. In 1974, a deadly famine devastated Bangladesh. Two years later, Yunus started the Grameen Bank to help the poor get access to small loans without requiring collaterals. This also helped lessen their reliance on loan sharks who took advantage of the grim situation.

The Grameen bank has grown since then, and it now has 2,568 branches across the globe. Yunus believes that there is a pressing need to have more micro and nano-credit institutions to help the poor simply because traditional banks only serve the rich. The mindset and approach of the Bangladeshis at that time, taking matters into their own hands, being resourceful with what little they have and not relying on the government to solve all their problems, can also be applied to developing nations such as Uganda, where the discrepancy between the rich and the poor is getting wider as each day passes.

Larry Fink, CEO of investment firm BlackRock, echoes the same sentiments. In a letter penned to companies it invests in, Fink stressed the importance of making positive contributions to society. He also changed tunes when it comes to a hostile takeover by activists investors who are protecting shareholders by forcing companies to change or innovate. One of the companies that Fink influenced to evaluate its stance on climate change is Exxon Mobil.

Some of the companies helping improve people’s lives are Bioquark, Hungry Harvest and Made in Brownsville. On the other hand, good karma for big companies making investments in social businesses come in the form of tax breaks. In the U.K., the tax relief was implemented in 2014. An investor who lends £10,000 to a social enterprise is set to get a £3,000 reduction from his income tax bill. The social businesses will get financial boosts that have lower interest rates compared to banks since investors are getting tax breaks from it.

Alcove is a tech company in the U.K. which sets cameras and sensors in the home of chronically ill people. This enables them to spend the rest of their remaining time in the comfort of their own home and not be forced out into care homes. Alcove wants to be a disruptor in the U.K. care system. Within three years, the company is making profits and local authorities, private companies and a major insurer have adopted its system.

The formula is fairly simple to everyone: big companies should help social businesses. Along the way, they can enjoy tax breaks or reap benefits that are unquantifiable such as good public image among its shareholders. With resources at hand, a little help can go a long way in improving the community, which eventually benefits in the long run. From Bangladesh to Uganda to the U.K., investing in social businesses is effective and results in ROI. It is hard to imagine what can go wrong with this setup.